A steady decline in borrowing costs has ended for now, as mortgage rates posted the largest one-week increase in six months. However, some analysts still don't expect any big changes in homebuying sentiment.
The 30-year fixed-rate mortgage averaged 6.32%, up from 6.12% last week, Freddie Mac said Thursday. The increase, coming after an unexpectedly robust September jobs report, is the biggest since April but remains well below the 7.57% average from the same week of October 2023, the mortgage giant said.
The 15-year fixed-rate mortgage averaged 5.41%, compared with 5.25% last week, according to Freddie Mac. One year earlier, the 15-year rate averaged 6.89%.
The more volatile daily mortgage rates also increased from one week prior. The 30-year fixed-rate mortgage stood at 6.62% on Thursday afternoon, down 0.05% from the previous day but up about 6% from last week, according to Mortgage News Daily. The 15-year fixed-rate mortgage also dropped 0.05% Thursday to 6.16%, but that's still 10% higher than last week.
Rates had been falling for more than a month until they reversed course last week.
"People got really excited when rates dropped in August, and now will they decide not to buy? Probably not," said Justin Benefield, academic director of Auburn University's Winchester Institute for Real Estate Development, in an interview. "This may cause demand to drop a little, but I don't see it falling off a cliff."
The rise is mostly the result of "shifts in expectations" and not underlying economic issues, noted Sam Khater, Freddie Mac’s chief economist.
"Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market,” he said in a statement.
Meanwhile, for the week ending Oct. 4, mortgage applications dropped 5.1% from the prior week, the Mortgage Bankers Association announced Wednesday. Mortgage refinancings fell 9% from the previous week but were 159% higher than the same week one year ago.
“As we have highlighted before, the decision to buy a home is impacted by many factors, not just the level of mortgage rates," Mike Fratantoni, the trade group's chief economist, said in a statement. "The largest constraint for many prospective homebuyers over the past year had been the lack of inventory. Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead.”